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CIMIC share price on watch after posting $367 million half-year profit

The Cimic Group Ltd (ASX: CIM) share price could be set to climb this morning after the company reported its half-year results in an after-market announcement, headlined by a $367 million net profit after tax (NPAT).

What were the CIMIC half-year highlights?

CIMIC reported stable revenues of $7.0 billion for the half while also maintaining its earnings before interest and tax (EBIT) and NPAT margins at 8.2% and 5.3%, respectively.

The company’s $367 million profit is a minor year-on-year (YoY) increase, up from $363 million reported in 1H 2018, while operating cash flow was flat at $1.8 billion.

Positively, the company earnings before interest, tax, depreciation and amortisation (EBITDA) cash conversion rate came in at 87%, while free operating cash flow of $1 billion also shows strong underlying performance by the group.

Management noted a strict focus on managing working capital and generating sustainable cash-backed profits as a key factor behind the strong numbers.

CIMIC was awarded $8.3 billion of new work in 1H19, while the company said that it also maintained its bidding discipline in the process.

The group also noted its strong $60 billion pipeline for construction, mining and services opportunities that remains for 2019, with a further $400 billion for 2020 and beyond.

CIMIC appears to have enough balance sheet strength to continue its growth, with $2.7 billion of undrawn debt facilities as at the end of June and a BBB investment-grade credit rating from Standard & Poor’s (S&P) with a ‘Stable’ outlook.

The company reaffirmed its FY19 NPAT guidance at $790 million to $840 million, subject to market conditions, largely on the back of the strong construction and services pipeline.

In terms of earnings quality, CIMIC reported no significant one-off impacts on earnings in a good sign for investors, while its cost of debt fell 30 basis points YoY to 3.6%.

How has the CIMIC share price performed in 2019?

While the headline numbers look solid, there are no signs of astronomical growth in these figures for the Aussie construction group.

The CIMIC share price has edged higher in 2019 and is trading at $45.78 per share as at yesterday’s close, having had its 2019 gains largely erased in early May following media speculation it may be in breach of its continuous disclosure obligations.

While it will be interesting to see the market’s reaction to CIMIC’s numbers, another strong performer in the construction space has been Austal Limited (ASX: ASB), which saw its share price rocket 11.2% higher yesterday on updated earnings guidance.

The Austal share price has climbed 107% higher so far this year on strong contracts and positive earnings, and is well placed to deliver a strong full-year result in the August reporting season.

For those looking outside of the Industrials sector, this top ASX banking stock is looking like a great value buy in the second half of the year.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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